perhaps he was also influenced by what happened to both Queenan and Costello when they tried to go about it in the legit way. Plus Sullivan, already the golden boy in SIU before, was now even more of a hero in that department after he'd taken down Costello (from their perspective). His status there, a lot of colleagues in influencial positions in SIU would maybe close ranks around him, and as you say, it would also be embarrassing for the department to admit that their rising star had turned out to be Costello's biggest mole, so it would be in their interests for it to go way. This, combined with the way Sullivan had managed to weasel his way out of any previous suspicion and, either through Sullivan himself or from other moles that Costello had planted in the department, had anybody going after him murdered, would make it difficult and extremely dangerous for Dignam to tackle him through SIU - in fact it's clear from his interactions with Alec Baldwin's character (i forget his name) that Queenan was the only person he trusted and was comfortable working with, so he wouldn't even have known who to bring in to help him with this.
Hence he worked alone and exacted his own justice.
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